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Coin Laundry Pricing Strategies (Part 1 of 3)

Some Basic Premises to Keep in Mind When Establishing or Changing Vend Prices

CHICAGO — Phil Arvin and his two partners opened their first Maytag-equipped coin laundry in Memphis, Tenn., last March. The 5,000-square-foot attended store is equipped with new energy-efficient 60- and 80-pound washers that are much larger than those in competing stores and thus could command a higher vend price, Arvin says.

But the group followed the suggestions of distributor Justin Laundry and established prices that are comparable to the laundries nearby, Arvin says. “Even though we’re offering a much higher quality product, we didn’t want to be perceived as the higher priced place.”

This is just one example of how the market can influence a laundry’s pricing strategy. But other factors are at work, too, and there are some basic premises that the self-service laundry operator should keep in mind when establishing or changing vend prices.

Criteria for Setting Price?

Upon what criteria should a laundry owner base his or her wash and dry vend prices?

“It really comes down to two issues,” says Kevin Hietpas, vice president of sales and marketing for Dexter. “No. 1 is what’s happening to his costs. How have costs impacted the viability and profitability of his business? Owners should have a good sense of where their business is tracking from a performance standpoint.

“No. 2 is where is he competitively. None of us exist in a vacuum, so you want to understand, ‘I might want to get to a certain point, but as of right now the market won’t let me go there all at once.’ That’s a secondary concern, because I think if the owner is providing good value, it’ll be reflected in his costs. He’s not going overboard with what he’s charging, nor is he under pricing for his service.”

“We have a lot of ‘rules of thumb’ in this industry,” says Gary Gauthier, national sales manager, vended laundries, Milnor Laundry Systems. “When it comes to pricing, it’s typically recommended that gross monthly receipts from washer/dryer revenues should be at least four times the monthly rent and at least five times the monthly utility expenses.”

A store owner needs to be aware of and factor in the competition’s prices when determining his or her own washer and dryer pricing, says Kent Walters, national sales manager for Maytag/Whirlpool Commercial Laundry.

“The owner’s goal should be to produce the best experience for the customer from ambiance to equipment and services—and the costs associated with washing and drying play a large part in this equation,” Walters says.

How Do Your Front-Load Prices Compare?

American Coin-Op surveyed its e-mail subscribers about their November 2011 front-load vend prices — their lowest and highest, and whether the prices had changed since the previous November. Those polled were not asked to identify machine capacities.

Results from the anonymous, unscientific StatShot survey show the lowest and highest prices varied quite a bit among the four regions.

In the West, customers could get a front-load wash for as little as $1.50. The lowest-priced front-load washes ranged from $1.50 to $3.75. Nearly 88% of these prices were unchanged from November 2010. The remaining 12.5% of respondents had raised their lowest-price wash during the 12 months.

The price range for the most expensive front-load washes in the Western region was $2.75 to $7.89. Every respondent reported these prices were unchanged from a year earlier.

Low-end front-load prices in the South ranged from $1.75 to $4.25. Approximately 62% of respondents had kept the same low price since November 2010, and 31.6% had raised the price. Just 5.3% had lowered the price.

Southern customers faced the widest price range of all regions — $2 to $17.50. Nearly 58% of operators reported having raised their high-end price since November 2010, and the remainder were unchanged.

In the Northeast, the most inexpensive front-load prices were $1.50 to $5.50. Just 6.7% of operators had raised their prices in the previous 12 months, while the remainder had kept the prices unchanged.

When it came to the most expensive wash, Northeastern customers were paying $2.25 to $8 in November. Approximately 21% of respondents had raised this price compared to November 2010, while the remainder had stood pat.

The most inexpensive front-load prices in the Midwest ranged from $1 to $4.50. Just 5.9% of operators had raised their prices since November 2010, while another 5.9% had lowered them. The remainder had kept prices unchanged.

On the high side of front-load prices, Midwestern customers faced a range of $2.50 to $8.79 in November. Some 12% of respondents had increased prices, with the remainder keeping the status quo.

Tuesday: Should you announce a price change?

About the author

Bruce Beggs is editorial director of American Trade Magazines LLC, including American Coin-Op, American Drycleaner and American Laundry News. He was the editor of American Laundry News from November 1999 to May 2011. Beggs has worked as a newspaper reporter/editor and magazine editor since graduating from Kansas State University in 1986 with a bachelor’s degree in journalism and mass communications. He and his wife, Sandy, have two children.

I'm a pretty conservative guy so it's nice to see some things have stayed the same for 45 years. Unfortunately, it's not so good when they got it wrong 45 years ago and still carry on with the same dumb advice.

I'm talking about distributors who always recommend new owners start off with a little lower pricing than the competition. Think about this: someone has to have the highest price! You have 5000 sq. ft. of store, bigger than all your competition, but not YOU for the highest price. You have 60 lb. and 80 lb. machines, bigger than all your competition, but not YOU for the highest price. You have BRAND NEW machines, the latest and best available, but not YOU for the highest price. You have BRAND SPANKING NEW carts, tables, chairs, floors, wall coverings, light fixtures, everything, your store will never again look this fresh and beautiful, but not YOU for the highest price, you can't get there right now! O.K. not YOU for the highest price, but the industry needs someone to have the highest price so everyone can eventually raise theirs; so who's your candidate?

As I said, dumb. Always has been, always will be. I have not seen a distributor "run" a profitable store. They build it with early year lease concessions, they build it with 'at cost' machines, they build it with 'at cost' in house installation crews. Then they run it at a loss for a year or two until they can sell it as a profitable "turn-key business" for 300 or 400 thousand dollars, and sure that's profitable for them, selling it, never running it.

To run a store profitably, you need high enough prices to earn a profit. Big surprise there, eh?

O.K. I've opened a few stores, so I understand the need to get some business drummed up in a hurry. Along with advertising and opening promotions, you need to do something with prices....So here's my advise: Charge the highest price around-you're worth it in every category detailed above, newest, largest, etc. etc. Then discount the price as necessary, always keeping the "proper value " price in view. If 30 % off everything gets you to below the competitors' price where you wanted to start, then give everyone 30% off. But now you actually have lots of options. You could lower the discount to 20% on week-ends and raise it to 40% on Tuesday senior's day. You could gradually phase out the discount entirely. You could keep it on the washers and remove it from the dryers. Etc. etc. You are never actually "raising" your prices. They started at the proper level they needed to be, and you are merely phasing out some of the "opening year specials"...

Waiting until you have out of order signs on your machines, cracked floor tiles, yellowed light fixtures, rusted carts, and dilapitated decor to finally raise your prices - well it never happens, does it?